Today I will be interviewing Joe Mihalic. He is the author of ‘No More Harvard Debt’, and I am just pleased to have him on. He basically saw that he had $90,000 in student loan debt and decided to tackle it, beat it in seven months. He was intense, insanely intense about it. He basically passed on everything, sold a lot of stuff, and we kind of get into the philosophical around consumption and your wants and happiness, things like that. He has a great book on Amazon – it’s $2.99 – and it’s called ‘Destroy Student Debt: A Combat Guide to Freedom’, and I recommend it. It reviews well, and Joe – as you’ll see in the interview – is a smart guy with a lot of insights when it comes to psychology and debt pay-down.

So, without further ado, here is my interview with Joe:

J: Alright, I’m here on the phone with Joe Mihalic. Thanks, Joe, for coming on the podcast.

JM: You bet, Jesse. I’m very glad to be here today.

J: Alright Joe, so you are an average Joe, right? But you did something pretty crazy back in 2010 or so.

JM: What’s that? When I took on a bunch of debt or…?

J: Well, yes. Just give us… give us just… These listeners probably don’t know you by name, so give them a little history on what your story is and, yes, just what kind of makes you not average, I guess, in this day and age.

JM: Okay, sure. I got my MBA from Harvard in 2009 and took on about $100k of debt to pay for it. And about two years later, after paying off roughly $21k of that debt, I still had $90,000 left to go because of all the interest that I had paid down. It only put really a $10k dent in the overall principal. So I decided in August, the end of August, to try and pay off $90k in ten months. And I didn’t really know how I would do that, but I just felt like there was a better use for the $1,067 I was paying every month on these loans. And I wasn’t really sure what I wanted to do with the money, but you know, it ranged from such noble things as saving up for my future kids’ college funds. I don’t even have a girlfriend, but I felt like that would be one good use of the money. But then more selfishly I was thinking, you know, I could go on more trips if I got rid of this $1,067 monthly payment. So I embarked on this mission to try to pay the loans down, and I was actually successful and I did it in seven months instead of ten.

J: Seven months, $90,000. So, how was… I mean, you looked back, you saw the debt, you saw that the interest was substantial. How did that affect your outlook? I mean, you had a job at the time, I would imagine; you’d been graduated for a little while.

JM: Yes. I had a job, a good paying job, and I had managed to buy a house, furnish the house, buy a couple of cars and a motorcycle and some other cool toys; and you know, I was living pretty well – travelling, going out on the town here and there. But then I sort of realized… I looked at my finances and I looked at where this $1,000 was going every month and I decided, you know, I’ve already got the education, so this debt is really unsecured. I already benefitted from it, so there’s got to be a better use for this $1,000. I felt sort of stuck with it, and I thought if I can just tighten the belt for ten months, cut back a little bit here and there and put a dent in it, then I’ll be better off for it. You know, maybe the monthly payment goes down. Maybe I don’t pay the entire thing off, but I put a dent in it and I can spend… put less money towards it every month, and free up some of that debt payment and use it for something different.

J: So, what did you… where did you cut? I mean, it sounds like you had… you know, you said you had a motorcycle and you bought a house and furnished it, so you obviously consumed quite a bit. But on the cutting side, what happened there?

JM: So, on the cutting side I just basically did a lot of repairs around the house by myself. So my car got a hole in the convertible because it’s an older car, so I put duct tape on it instead of buying a new $2,000 top. I actually took a flask out when I went out with my friends to the bars instead of paying for drinks at the bar – probably one of the more controversial things I did, based on the feedback I’ve got, but my friends thought it was brilliant. I didn’t go to lunch with my co-workers or friends whenever they invited me; I just ate at my desk. I basically ate spaghetti at my desk every day. I didn’t go on any dinner dates with anybody, and I didn’t go to the movies either as a date or with friends. When movies came out and friends wanted to go and see them, I would just say, “Thanks, but no thanks.” I didn’t buy any clothes for those seven months. At one point my favorite shoes got a hole in them, but I just… I lived with the hole and I just hoped people didn’t notice it.

I made things last longer; so for a while there I was basically hydroplaning all over the road because my tires were so bald and I refused to buy new ones – which, you know, I can’t recommend for anyone. But it did save me some money for a little while. And then I made my contacts last longer – they’re bi-weekly, I think I stretched them out to four to six weeks. I didn’t want to pay for contacts because it costs $200-$300. I didn’t go home for Christmas. I basically stayed in Austin, at home for Christmas. And then I didn’t go to a couple of bachelor parties or weddings during this time either to save some money.

J: So no travel, basically.

JM: Zero travel. I bought tickets to Ann Arbor before I started off this mission, and you know, the cancellation fee is pretty steep there. So I just bit the bullet, went to Ann Arbor, reunited with my friends. I’m glad I did it, but while I was there it was hand-to-mouth; I was living very, very frugally. No meals out or anything like that; protein bars and any food I could get from friends, basically.

J: I see. So what were… You know, you mentioned kind of your two-step plan that you cut costs… You obviously cut tremendously; you just basically weren’t doing anything. If someone hears, “Okay, yes, he didn’t fix his convertible,” they get one idea; but then when they hear, “Well, he also didn’t go home for Christmas,” then people start to get it. That’s some real sacrifice that a lot of people just wouldn’t be willing to make. Looking back, is there anything that you would have done differently in the whole seven months?

JM: That’s a great question and I actually haven’t gotten it before, so it made me think when you sent the questions over earlier. And you know, it started out as… So the short answer is yes, there is. I would have sold my car and my… I would have sold my second car and my motorcycle and my road bike and some other miscellaneous stuff earlier in the whole process. But also no, there’s not anything I would have done differently because when I went into it it was just… it was very simple. There was nothing really more meaningful or deep behind my mission; it was just to literally have an extra $1,000 in my pocket every month that I could spend or put towards something different than unsecured debt. So it took me… so I started cutting back in certain areas of my life–like taking the flask out or missing movies, missing dinners; and I started cutting back on those areas and I realized I didn’t really suffer because of that. I just looked for fun things elsewhere – hikes, for example, instead of the movies or dinner.

And so when I realized that I wasn’t really suffering by being frugal, and in fact was just as happy if not more happy in certain situations doing these frugal things, I took a look at the car and the motorcycle and the road bike which I had been swearing up and down that I would never get rid of because they meant a lot to me at the time; I took a look at them and I just, you know, tried to dare to think about what life would be like without them. And, you know, after living frugally in other areas of my life, it was pretty easy to think about what life would be like without those things; because I didn’t think I could miss dinners and movies and yet I did. I couldn’t imagine taking a flask downtown at the bar and filling it up, filling up a Sprite or a Coke with the flask in the bathroom, but I did. So I was like, “What the heck?! Let’s sell these off.”

So I sold them off and it took me a few months to sort of wrap my head around that and get used to that idea. But once I did it was fine. I had a car and I got around just fine with it. I didn’t need all of that other stuff. And so, you know, looking back it would be great if I’d just done that right off the bat; but I think that that would have been maybe a shock to the system, if you will, and that I needed to sort of take baby steps on my road to living below my means.

So now I’m several months out – I think five… actually probably seven/eight months out now – and I’ve got money in the bank, I’m investing money, I’m saving my money, and I could afford a second car and a motorcycle and a road bike. I could buy all that stuff back, but I’ve got absolutely no interest in doing it because I’ve learned how to become content with what I have and live below my means. And that actually feels a lot better than where I was a year and a half ago when I was living at my means.

J: Yes, absolutely. So, where do you… I mean, without the debt and with, I think, something even stronger than the $1,000 in the bank each month extra, what is your outlook? You know, your perspective has changed dramatically, so what does that mean for your life goals in comparison to what they were before? I mean, I’m just kind of curious if it changed your trajectory at all.

JM: Yes, good question. So, with my new model of… you know, my new model of living below my means I’m saving half of what I make and I’m spending half. But the thing is, I’m not even interested in spending the other half, so I’m saving more than half, just because I’m comfortable living below my means. And so what that’s allowed me to do… and so I’m projected to retire well before the age of 65, which is nice. You know, obviously there’s a lot of assumptions baked in there, so we’ll see; but that’s the trajectory right now. But what it’s allowed me to do is it’s actually allowed me to quit my old job and find a new one. Now, I’m still in the tech industry in Austin, but I’m in a completely different company in a completely new function – something I’ve never done before. So, I’m in supply chain. And I took the job and I knew there was a risk involved. Like, if I’m not good at this then I could get fired and then I don’t have an income. But because I was living below my means, because I had savings in the bank, I wasn’t as concerned. So I went out on a limb, I took the risk and it ends up, thankfully, I love the job. You know, I’m decent at it, my work is respected and I’m quite happy where I’m at – and it doesn’t look like I’m going to be terminated anytime soon. But it allowed me to take that risk, and it also allowed me to expand my skill set and experience another company. So, that’s one thing and that was shortly after I paid off the debt and had saved up some money and was able to take that risk.

J: It is interesting when people talk about luck or having opportunities to do this or that. It’s amazing what happens when you increase your flexibility by relieving yourself of that debt.

JM: Absolutely.

J: It’s pretty much… you know, you can’t really calculate it because a job is not just about maybe a bigger pay check, but it’s your life’s work. So it’s always kind of disheartening when you have someone say, “Well, I can’t leave this job. I’ve got to pay off this or that and make these payments,” and then you’re just thinking, “Man, that’s your LIFE,” you know.

JM: Absolutely.

J: It’s a life decision. So it’s cool. What was the… I mean, I guess I was expecting for you to say you had some epiphany, like I don’t know, some parting of the clouds; but you basically just saw what little progress you’d made over those past two years, I guess, and just decided.

JM: Yes, it was [?? 0:13:03]. I mean, I came out of it being sort of this… not anti-consumer, I wouldn’t call myself anti-consumer, but certainly I consume less these days. But really, it was… the auspice of it at the beginning of it was very… I mean, it was very… it was fairly superficial. I really just thought, “I don’t want to spend $1,000 on something I’ve already earned. Like I’ve already got the education, I’m sick of spending this money every month. There’s got to be a better use for it.” So I came out of it realizing that life’s not all about money and we don’t have to spend every single dollar that we make to be happy. But yes, there was no parting of the clouds.

And people ask me, you know, “What advice do you have for me?” And I used to say, “It’s not rocket science. Just spend less money than you make.” But really it’s actually more difficult than rocket science, spending less money than we make – at least in America, I think. Because number one, you’ve got an incredible amount of peer pressure. You’re with your group of friends – your comparison set, if you will – and you’re with people who are slightly better off than you; and you’re constantly comparing yourself to the people you’re surrounded by and the people you perceive as better than you. And so there’s this incredible amount of pressure to keep up with these people – keeping up with the Joneses, right? So in order to spend less than you make, number one, you have to say no to peer pressure, and that’s incredibly difficult. You just have to find ways to say no to peer pressure. Number two is you have to say no to yourself. So, everybody battles their own insecurities and I found that I was fairly insecure. And the way that manifested itself was in buying a lot of things because I thought that would make me happier or better – but it certainly didn’t.

So, you know, I think that it’s difficult, but on the flipside… It is a lot of saying no; it’s also a lot of saying yes – saying yes to what we have and saying yes to being happy with what we have in our lives already, and finding happiness in those things and just living a simpler life.

J: Yes. I like that you mentioned, you know, as part of the self-esteem, I think a lot of people that would say, “I don’t have a self-esteem issue, I’m confident…” I mean, you graduated from Harvard, you obviously… it’s no small feat to do that. So you would expect, and a lot of people I think believe, that these accomplished people – that most of these podcast listeners are – that they would be confident. But a lot of times I think we hide… some kind of questions of self-worth, we hide behind stuff to just avoid answering that.

JM: For sure. I mean, a lot of people are so successful because they’re driven, but what are they driven by? I personally was driven by… I moved around – Colorado, Oregon, New Hampshire, Upstate New York, Michigan, Italy, back to Michigan – all before I was 13, and so I didn’t really have a very good support network growing up outside of my family. I didn’t have a lifetime friend or lifelong friends or anything like that; I never really felt like I belonged. And then I had a birthmark on my face that I got bullied for constantly. People would say, “Ah, you got beat up. Ah, you spilled Kool-Aid on your face,” you know, they’d throw chewed-up gum in my hair and they’d bully me a lot. And so I had those two issues. And then I got acne – like a super-bad case of acne – all over my back, my face, my ears. I had to get syringe injections for my back just so I could take a shower, otherwise it was too painful to take a shower.

And so, you know, I got bullied quite a bit. I was eating lunch in high school in the cafeteria and just had no friends, and my goal in high school was to literally just graduate high school graduate college and land a job with a $100,000 salary. That was literally my goal. And it was so superficial, but looking back I didn’t have a lot of friends so it made sense. It sort of made sense, you know, looking back that I would try to seek solace or seek friendship in material goods, material possessions and money. Thankfully the acne cleared up and the birthmark got lazered away, but those are scars that tend to stay with somebody – at least they did with me. So it took a lot of time to develop a healthy amount of self-esteem and a high degree of self-worth – as you pointed out. And so I think part of this process, again, it’s more difficult than rocket science because self-esteem is so organic; it’s not something that you can just learn. You can’t pick up a textbook, attend a lecture and learn how to love yourself.

J: Yes. It’s deep, you know. I mean, you’re mentioning things that happened when you were 13/14 in high school – that’s years ago. And I think a lot of times people are saying, they kind of beat up on themselves – “Why do I do this? Why are my finances this way?” – and there are some underlying behavioral issues that I think we can get to the heart of and give people some reasoning, and then say, “Okay, I can’t beat that. I understand this now, and this is what I’m going to do.” This is cool. I’m glad you came on, Joe, just because I know everyone would want to hear, “Okay, how did this guy do this in seven months?” but I think to talk about the deeper issue of it is what will really bring people more results in the end. So, you know, you’re finding your motivation, discovering a real motivation underneath what was initially just kind of a gut check – like, “Hey, this isn’t right” – and then yes, just… I mean, it changes your life. You know, different job and…

JM: Yes. And Jesse, I’d go so far as to say that without developing a healthy level of self-esteem I would never have been able to be successful. It wouldn’t even have occurred to me to pay off the debt and to start cutting back in areas of my life; I just wouldn’t have been able to. So I really do think that is absolutely fundamental to anyone who wants to… who is entertaining the idea of paying off their debt. I mean, clearly they already see the value in that and they probably are seeing just the fact that you don’t need a lot of things to be happy or to have a high level of self-esteem. So, you know, they’ve already started if they’re already thinking along those terms of wanting to live a debt-free life. It’s just getting to the bottom of the issue and then pushing forward.

J: Awesome. Well, I appreciate you coming on, Joe. This is great. I’m sure it will help a lot of the podcast listeners, so I really appreciate it and wish you a Happy Thanksgiving.

JM: Thank you, Jesse. I’m very glad that you had me on. I really appreciate the chance to talk to you and your listeners.

J: Hey, is there a website that everyone can check out, maybe read more of your story? I forgot to ask you that at the beginning.

JM: Sure. Swing on by nomoreharvarddebt.com and check out the blog. I’m not really updating the blog anymore, but it is chock-full of stories from my adventure between August when I started and March when I finished, and even has several more posts after that – some reflective posts – and other ways to cut back and live a fuller life without debt.

J: Awesome. Yes, nomoreharvarddebt.com – we’ll definitely make sure everyone checks that out. I appreciate it, Joe. You have a great rest of the day.

Until next time, follow YNAB’s four rules and you will win financially. You have not budgeted like this.

5 Responses to “YNAB Podcast Episode 60: No More Harvard Debt! How One Guy Paid of $90k of Debt in Seven Months”

This man seems like he’s lived a somewhat pampered life. He thinks that by having only one car, no motorbike, bringing his own lunch to work, and not going out to movies is a sacrifice. Give me a break. It’s hard to believe he owned a home, with 90k debt, and didnt’ realize that he needed to cut his spending. Obviously he has a lot of disposable income. He just decided to stop disposing it because it bothered him that he could dispose of it somehow else. This wasn’t a case of survival. Sounds like he wouldn’t even have been bothered if he had continued. I admire the cutting down 90k in debt, impressive, but this story leaves me flat. I have that kind of frugality, but it has been forced, an enforced, upon me.

I totally agree with you. This is an example of someone who’s making more than enough to pay off his debt. I admit, I was expecting a story of someone making less than 100k/year being able to pay that kind of debt off – but from what I’m hearing, it just sounds like he didn’t really HAVE to pay this debt off. Of course it’s not rocket science – he had the means and he made it happen. It would actually be amazing to read an example of someone with less than stellar income to overcome a big chunk of debt.

How do you pay off this kind of debt when $1000 a month is half your income? I have $62K in student loan debt and my income is not anywhere near where I can pay even what they want me to pay on it, to just cover the interest. I’ve already cut everything I can. I don’t own a car or a house. I don’t have anything worth selling. How do you make a dent in such a huge debt bill when you don’t have the kind of disposable income that this guy obviously had? That’s the podcast I want to hear.

Yep, that’s the question. The only ways are to reduce your expenses and increase your income so you spend less and have more to pay towards the debt. We face 46k in student loan debt from my spouse, and we are trying to pay it down while she’s still in the grace period. We are fortunate to have income. But if I ever lost my job, we’d be in trouble. We might then face the difficult choice of declaring bankruptcy.

I think there are ways to push your debt out longer if you cannot make the payments they ask. that’d be a way to make it more palatable, but increase the length of the pain. Either way, you have tough choices to make.